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Developers encouraged to build rental only estates

Developers encouraged to build rental only estates

New home builders and property development contractors may be encouraged to build new exclusive rental only housing estates where none of the properties will be for sale.

The UK Government are exploring the idea and it could mean the introduction of a separate planning class for new-build residential property that will be rented out, and would mark a fundamental shift in the whole structure of the UK housing market.

The proposal comes following public research by the UK’s largest listed residential landlord – Grainger. The results have highlighted the huge shift in public opinion over renting property rather than home ownership.

67% of respondents believe long-term property renting will become as commonplace in the UK as it is on the continent and 54% also believe that more people will be renting property rather than owning their own homes in 15 years time.

Grainger also predict that in years to come, the average age of the first-time buyer (FTB) will be in the early 40s, putting increased pressure on the private rented sector.

Under the UK Governments guidance, institutions and property companies would own, operate and trade multiple build to rent developments.

Asset management company Schroders believes that this buying and selling activity between profit-chasing corporate companies would mean that residential property prices in this sector would be highly competitive.

Build to rent schemes would be aimed at young professionals and the retired who want to avoid home ownership. The proposed estates could also incorporate social and sporting facilities, such as pools and gyms, in a bid to attract professional tenants.

Another possibility would be that large scale landlords like Grainger could build on land offered by local authorities, rent out the homes at affordable rents, and at the end of an agreed period, sell the property on.

90% of landlords in the private rented sector are private individuals with multiple properties, who in turn are responsible for housing approximately 3.6 Million households.

Currently, only a small proportion of PRS landlords undertake thorough tenant referencing and only the most intuitive landlords use Rent Guarantee insurance to ensure a regular rental income.

With demand for suitable private rented sector (PRS) residential accommodation continuing to rise, there has been increasing pressure to bring large corporations into the private sector.

The Government is taking the issue seriously, looking at how to encourage Real Estate Investment Trusts (REITs) in the UK PRS residential sector.

The Communities and Local Government (CLG) department, Led by Sir Adrian Montague, has also launched a new consultation reviewing the barriers to institutional investment in private rented sector housing. The report is due out in June 2012.

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